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What are the advantages of changing the company

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Ali Salem is the manager of a small chocolate company located in Abu Dhabi, and it is a family business. His father established it as a small chocolate shop in 1983. The chocolate shop has experienced a significant growth in the last 15 years, and that is was due to the leadership of Ali. During these years, he and his partner (Mr. Hamdan Mubarak) changed the character of the company from being a small shop to a bigger company. Currently the company is producing its own brands and exporting some of them to neighboring countries, like Saudi Arabia and Kuwait. In addition, the company is importing different types of chocolate brands from Europe and the USA.

Due to the high demand on the products of the company, Mr. Ali and his partner decide to expand the business and to open different branches and factories in the MENA region and Europe. A Financial advisor hired by Mr. Ali estimated that this expanding requires at least $ 200 million. However, this amount of money is far beyond the financial means of the two partners. As a reason of this situation, they decided to transfer the company into a public one by issuing 10 million shares at $20 a share. The company will be listed on the Dubai Financial Markets (DFM). In addition, Ali and Mubarak realize that as the company is getting bigger and going public, it is better to hire a management team with international experience in the chocolate industry.

Questions:

1. What are the advantages of changing the company from a small company owned by two to a public company?

2. How do you expect the relationship between the two partners: Ali and Mubarak with the new management?

3. If the company is going public, how much cash the company will benefit? Also, what are the benefits for the company if the price of the share increases later?

4. What is the main objective for Ali and Mubarak after the company becomes listed?

Reference no: EM132630358

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